СодержаниеQuestions.
1. Why are Russian banks so weak and badly organized that can’t compete with foreign ones for borrowers and provide also good conditions of crediting?
2. You said that several methods of credit risk minimization exist, why have you paid attention to the estimation of credit solvency of the borrower?
3. Why does crediting become such a popular source of attracting additional funds?
4. In what way do banks determine the limitation of credit for different borrowers?
5. You said that foreign banks provide better conditions for crediting, but do they require some additional security of the debt? Do they make some specific demands?
6. What does the asset analysis show?ВведениеIntroduction.
At present the attention of considerable number of investigators from different economic science areas are attracted to the subject of risks. Such risks are inherited in any activity including banking sphere. The problems of risks in some economic areas are directly connected with the solution of the profit maximization problem by means of losses minimization. The activity of any economic subject is directed to the solution of this problem. Such approach allows investing earned funds into the subsequent development of the production. Thereby the output increases and consequently ceteris paribus profits also increase. But the volume of the earned profits is variable - it depends on the majority of external and internal factors. Therefore the size of profit may be insufficient to increase the volume of output or to modernize the technology of production. In order to cover the lack of resources the enterprise has to apply to its partners for getting loans or to banks for getting credits. Applying to the credit institution for getting credit resources the enterprise operates as an independent economic subject. The bank in its turn is interested in earning profit, the main source of which at present time is the revenue from providing credit products. Because of this interest the bank provides an enterprise with financial resources at the expense of own or attracted funds and it bears all the risks connected with such loans. The main risk a bank bears is the default risk of the borrower which is the possibility of his insolvency. Such inability to repay the credit in case of mass character can lead to the bankruptcy of the bank.
In developed countries there are special institutions, which aim is to minimize such type of risk and their object is to provide the bank with information about the advisability of giving credit to some potential borrower. Moreover the European Central Bank worked out special approaches, which allow each credit bank to carry out analyses in accordance with which the bank would make the decision about giving or not giving the credit to the borrower. At the present time in Russia there are no officially approved methods of borrowers' estimation, worked out by the government. Moreover, fundamental questions connected with bank risks are poorly investigated in the domestic literature; there are no complex approaches to the estimation of such risks and control of them. Methods of risk estimation widely used by foreign credit institutions still have very limited application in the practice of Russian banks. And it is only one problem in the process of organization of credit banking activity. There are also many problems in the process of creation the united system of credit bureaus – the legislation on this matter was passed in two thousand and four and up to the now there are number of badly arranged separate bureaus in credit system instead of several connected well organized bureaus.
But in spite of the weak organization of banking processes in Russian banking system, borrowers show increased demand for banking services, especially for credit services. To realize the scale of existing phenomena it is sufficient to look at the volume of credit operations, which increase with accelerating paces: from four billion dollars in two thousand to one hundred and six billion dollars in two thousand and four, and to one hundred and thirty nine billion dollars in two hundred and five. The growth of credits in two thousand and five was about thirty one point three per sent relatively to the credits, distributed among companies and enterprises, and about ninety point five per cent relatively to credits to individuals. If we want to characterize the situation in banking sphere, it is enough to say (as many analysts argue) that there is credit boom in Russia. It is common practice that people become accustomed to live on credit or to take one credit after the previous one. The main reasons for this tendency are:
• continuing growth of the Russian economy, which has a favorable impact on the welfare of companies and persons and as the consequence increased trust to government and its policy, beliefs in stability of the economy;
• the other factor is the competition between banks providing their services to the firms and individuals – an entrance of foreign banks into the Russian financial market and increase of the number of domestic banks spurs them to increase the quality of services, heightening the level of applied technologies, and to diversify theirs activity in order to be notable among others;
• finally, banks themselves are interested in the attraction of clients, because crediting is a very lucrative activity – the average level of profitability of credit operations is more than twenty per cent.
Along with positive growth of credit activity there are some negative factors such as the growth of outstanding loans – by nine per cent relatively to corporate credits and by one hundred and fifty seven per cent relatively to the individual’s credits in two thousand and five. It means that banks have not united credit policy regarding to the risk management: there are no efficient methods of estimation the solvency of potential borrowers, weak system of tracking the process of settling debts and undeveloped ways of prevention such unfair behavior of clients. For the clients' part there are also some problems like the lack of information about the real value of credits. Many banks hide such information about the effective credit rates. So the importance of such problems and insufficiency of their researching by government defined the subject of my work, it will be devoted to the credit policy of banks in relation to the corporate borrowers, to the direction of the research and the toolkit used.
The main purpose of this paper is to work out a multiple-factor model of estimation the solvency of corporate clients and to create an algorithm of determination the maximal sum of credit to each borrower. Also it is planed to build the system of credit risks management of banking organizations. The realization of the posed purposes will require the solution of the range of problems:
• to disclose the economic matter of credit risk and solvency;
• to reveal factors influencing credit solvency;
• to analyze modern domestic and foreign methods of credit solvency estimation;
• to work out a united credit policy, which will include methods of credit solvency estimation, the application of which is expedient and possible in the domestic practice without the attraction of additional resources from a bank and a borrower;
• on the basis of given methods to estimate the credit solvency of specific organization and to determine groups of factors, greatly influencing the level of credit risk;
• to formulate the direction of further development of given methods;
• to form fundamental approaches to the creation of risk management system in relation to the credit solvency of potential borrowers.
The matter of my investigation is the relations between the bank and its corporate clients on the occasion of getting credit, particularly credit risk arising when a bank gives the a loan to the corporate borrower, methods of its estimation, its management and decreasing. The object of this research is corporate clients of different organizational forms, which turn to the bank for credit.
The problems of credit policy were investigated by many scientists from J.M. Keynes, Ed. Altman, M. Scholes and F. Black to the modern economists such as A. Sheremet, V. Yampolskiy, O..Lavrushina and many others. But the economy is not at the standstill - every day there are some events, some changes, which also influence banking activity. And of course, the credit policy becomes more and more complicated as banks diversify the products they supply to the customers. Simultaneously, a credit process also becomes more complicated, so it is essential to develop further scientific activity in this direction.
My course project will consist of the introduction, two chapters, a conclusion and the list of bibliography; there will also be some short conclusions after each chapter. In the first one it is supposed to define the credit policy of a credit organization, to let understand why it is so important to form united policy of a bank towards its potential, existing and problem borrowers and to describe the organization of the credit process. There will also be some views on the practice of foreign banking organizations and some attempts to understand why they are successful in this sphere. So it will be rather descriptive. The second chapter of my project will be devoted to the credit risks, problems of estimation the solvency of borrowers, there will be offered some methods of estЛитератураThe list of bibliography.
1. Civil code of Russian Federation. Part one, two, and three /2006.
2. The banking. Korobova /2003.
3. The banking. Lavrushina /1999.
4. The banking: basic operations for clients. Tavasiev /2005.
5. Afanasyeva. The problems of crediting the real sector of the economy/ Banking/ 4 /2004.
6. Basov. Foreign banks in Russia: credit activity/ Banking/8 /2005.
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